Deviation Leads to Aggravation

Archive for December, 2007

I’m not much one for New Year’s resolutions, being of the mind that any activity that’s worth doing doesn’t need the excuse of a holiday to be performed, and any activity that does need such an excuse won’t be performed anyway (to see how an economic perspective can improve New Year’s resolutions, keep an eye on this site).

I am nevertheless resolved to read the following books before I leave Germany–not because of New Year’s, but because they were personally recommended by my favorite blogger, the economist and Germanophile Tyler Cowen:

Jeff, a Facebook friend, wrote on my Wall:

Which five German books should I read, before I return to Amerika [my translation]?

He seems to read German. I will recommend: Goethe’s Faust, Rilke’s Duino Elegies or Sonnets to Orpheus, Thomas Mann’s Buddenbrooks, Franz Kafka short stories (don’t forget “Ein Landarzt,”), and Hermann Hesse’s Glass Bead Game. Non-fiction does seem to count for the query, although it would not crack my list of top five. Schopenhauer tempts as well.

Prof. Cowen invites his readers to give suggestions as well (over 30 at this point), but I’m content for the time being with his picks.

I am back from my holiday sojourn through the eastern lands of the European Union, and it was an altogether enjoyable experience.

Interestingly, I found returning to Germany something akin to a homecoming. The optimistic side of me would like to interpret this as meaning that I’ve learned how to function more comfortably in German society than previously thought, but I doubt this for several reasons that I shan’t go into here.

In any event, I haven’t been able to scratch the blogging itch for over a week now, so I’ll be writing at a faster pace than usual for the time being. Do try and keep up.

One surprising factoid that I learned just before arriving in Germany was that it had no federal minimum wage, which stands in contrast to most other rich countries in the world. What surprised me further was how even left-leaning newspapers in Germany support having no minimum wage, concluding reasonably that the costs of instituting a minimum wage outweigh its benefits. I was thus disheartened to read this article a few weeks ago which informs me that Chancellor Merkel has approved a minimum wage for postal workers, paving the way for other industry wage floors and perhaps eventually to a federal minimum wage.

Many arguments can be proffered forth against a minimum wage: that it raises unemployment (especially among the low-skilled), that it hurts small business, that it is a very blunt tool for helping the poor. These arguments are strong in and of themselves, but I would raise another contention as well.

The price of labor (i.e. a wage) is no different than the price of any good or service in that it aggregates dispersed knowledge and functions as a signal to the market. Just as the price of shrimp is both a cause and consequence of hundreds and thousands of other related prices (e.g. scallops, nets, copies of Forrest Gump DVDs sold, etc.) so is the price of labor. When the price is set by market forces, it functions as a signal to job seekers as to the relative and absolute value of a given job, and reflects an astounding array of information that no one person could ever possibly know.

If postal workers are being paid paltry sums for their toil, it is because an appraisal has emerged from the decisions of millions of market participants that the job’s value is relatively low. The market signal is unambiguous–less people should become or remain as postal workers. The German government has now distorted the price to signal just the opposite; namely, that more people should enter the postal service. This is, on the face of it, utterly absurd. The market price is certainly bad news for postal workers, but to propose that the response to bad news should be to rewrite it as good news is juvenile. Political action may be able to change prices, but it cannot change the underlying reality behind the prices.

Germany has recently emerged from an economic slough in large part due to reforms which diminished price distortions in the labor market–a shame that this small reversal might be necessary in the sausage factory of politics in order to continue along such a promising path.

Seeing me heating up some canned corn to go with my dinner, my German roommate told me an amusing story that occurred at some point during the Marshall Plan:

After World War II, Germany (and much of Europe) was so badly damaged that economic output took several years to reach prewar levels. Indeed, many Germans were on the verge of starvation because food production was so lackluster. When the United States government began pouring money and resources into Western Europe in an effort to help with the recovery, they asked the Germans what foodstuffs they wanted, to which the Germans immediately replied that they needed grain.

Unfortunately, the German word for grain is korn, so instead of sending the stuff of sourdough, the Americans sent the stuff of Squanto–the German word for corn is mais, incidentally–and soon enough, Germans were up to their ears in, well, ears.

All things considered it was a minor mishap, of course. Sure, it was inexcusably bad intelligence, but it’s not as if it were the sole basis for an otherwise unjustifiable war or anything…

The residents of Rostock will undoubtedly eagerly pour into the Ikea branch opening tomorrow and revel in the Swedish savings it provides. I grew acquainted with Ikea during college, making several trips to the closest branch 200 miles away in order to furnish my apartment with the contemporary yet elegant Nordic style. It is a harsh irony that now when I have an Ikea less than five miles away, I have absolutely no use for it. It’s like having ten thousand spoons when all you need is a knife, or, say, a black fly in your chardonnay–completely ironic.